Special VAT Accounting scheme

Special VAT Accounting Schemes

HMRC schemes designed to simplify VAT calculations, record keeping, and administration while easing potential cash flow issues for businesses.

Standard Accounting Scheme

The default VAT method where businesses pay VAT on issued invoices and reclaim VAT on received invoices, regardless of whether payment has been made.

Standard Accounting reporting deadline

VAT Returns and electronic

payments are due one month and seven days after the end of the VAT quarter.

Cash Accounting Scheme

A scheme where VAT is only accounted for when money actually changes hands (payment received from customers or paid to suppliers).

Flat Rate Scheme

A scheme where a business pays a fixed percentage of its VAT-inclusive turnover to HMRC rather than calculating the difference between individual sales and purchases.

Annual Accounting Scheme

A scheme where a business makes nine monthly or three quarterly interim payments and submits only one VAT

Return per year.

Flat Rate Scheme reporting

The VAT Return identifies flat rate turnover for the period and the specific amount of VAT due to HMRC based on the fixed percentage.

Cash Accounting reporting

Reporting frequency and deadlines are the same as the standard accounting scheme, but based on cash movements.

Limited Cost Business

A specific category within the Flat Rate Scheme that may affect the percentage rate a business must use.

Standard Accounting default status

Organisations are placed on this scheme by default unless they specifically apply for one of the other special VAT schemes.

Annual Accounting payment

structure

Involves making regular interim payments throughout the year with a final balancing payment (or refund) when the annual return is filed.

Purpose of Special Schemes

To ease the administrative burden and help with business cash flow

management.

Special Scheme eligibility

Businesses must meet specific criteria or situations permitted by HMRC to operate a particular scheme.

VAT period length (Standard/ Cash)

Normally covers a three-month duration, known as a VAT quarter.

Output Tax in Standard

Accounting

VAT charged on sales

invoices that must be paid to

HMRC even if the customer has not yet paid the business.

Input Tax in Standard

Accounting

VAT on purchase invoices that can be reclaimed from HMRC even if the business has not yet paid the supplier.

Electronic submission requirement

Most organisations must

submit VAT Returns online

and pay electronically, following Making Tax Digital

(MTD) requirements.

Flat Rate Scheme benefits

Simplifies the completion of the VAT Return by using a single turnover-based calculation instead of tracking all input tax.

Annual Accounting reporting frequency

The requirement to report is

reduced to once per year

instead of the typical

quarterly cycle.

Cash Accounting cash flow

advantage

Ensures a business does not have to pay VAT to HMRC until they have actually received the money from their customers.